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Introduction
Companies’ corporate and competitive strategies determine how well they will operate their respective markets and compete with other players. Tesla Inc. is an automobile manufacturer that competes with other large firms that have been in the market for decades, such as General Motors Company and Bavarian Motor Works (BMW). The company penetrated the market as an all-electric powered vehicle manufacturer, and others who have been gasoline-powered vehicles followed. Tesla uses various strategies to ensure that it remains a leader in the electric-powered vehicles market. Evaluating Tesla Inc.’s generic strategy helps understand why the firm will continue to have a competitive advantage over its rivals in the global market.
Tesla Inc.’s generic strategy has been its effective approach to achieving a sustainable competitive advantage over other players in the global automobile industry. Generic competitive strategy, as shown in Michael Porter’s model, defines the tactic used by companies to compete in the market (Rowland, 2018, para. 3). Tesla Inc. uses broad differentiation as its generic strategy, reflecting the company’s focus on adopting advanced technologies in all products it offers in the market to compete against other automobile manufacturers (Rowland, 2018, para. 5). The key competitors include General Motors Company, BMW, Honda Motor Company, and Toyota Motor Corporation. This generic strategy allows the firm to achieve and maintain a competitive advantage and lead in the global market.
Tesla Inc.’s Generic Strategy
As noted earlier, the company’s generic strategy is broad differentiation to target both segments of consumers in the automobile industry, the premium, and low-price buyers. The strategy mainly focuses on distinguishing the firm from the traditional automobile manufacturers with environmentally friendly and sustainable electric vehicles. Tesla Inc. invests more annually in research and development to establish a highly innovative and unique environment that facilitates the realization of the strategy and enhances return on the economies of scale (Rowland, 2018, para. 5). The company also offers a wide range of products and services globally, such as the Model 3 and premium electric sedan Model S. These products, among other vehicles, have a range of 250 miles to 370 miles (Furrier, 2020, para. 2). Battery performance varies with each model, and each car has customized storage and seats. Tesla Inc. also sells solar roof solutions, megapack batteries, and solar panel powerpack, among other related products.
The merger of Tesla Inc. with Solar City was aligned with the company’s broad differentiation generic strategy to ensure the effective pursuance of a clean-energy ecosystem. An amalgamation of Panasonic’s cell technology and Solar City’s technology focused on offering the most efficient and cheapest solar cell internationally, giving the company a sustainable competitive advantage against its rivals in the global market (Furrier, 2020, para. 3). The firm invests considerably in research and development and automation of processes to capitalize on this competitive advantage to reduce prices, further making the company a broad differentiator in the market. To ensure sustainable competitive advantage, Tesla Inc. uses different strategic objectives in its generic strategy, including investment in research and development, human resources, production, total quality management, and unique marketing approaches.
Tesla Inc.’s Strategic Objectives for the Generic Strategy
Research and Development
The electric automobile manufacturer has been increasing its investment in the research and development department to ensure that its products meet market demand and are unique. The company’s expenses in research and development increased from $0.7 billion in 2015 to approximately $1.5 billion in 2018 and it was $1.491illion in 2020 (Team, 2020; Pressman, 2021; Carlier, 2022). Much of this money channeled into the department focus on automation, software updates, and material costs. For instance, Tesla Inc. is determined to have full self-driving electric vehicles, which they believe is only achievable by having an advanced artificial intelligence (AI) for vision and planning reinforced by efficient utilization of inference hardware. Tesla’s massive investment in research and development is long-term. This strategic objective allows the company to develop new products that satisfy the market demand for improved renewable energy solutions, distinguishing it from other players.
Although there are other producers of electric vehicles in the automobile industry, Tesla Inc. is determined to sustain its competitive advantage in the global market by ensuring that its products are hard to imitate. Thus, the firm invests heavily in research and development to build sophisticated technology for its products. This strategy increases the barrier to entry in the electric vehicle and battery markets, positioning Tesla Inc. as an innovator and leader in the market, ensuring a sustainable competitive advantage. The investment facilitates regular updating of the company’s Neural Networks and AI algorithms, improving their autopilot feature that differentiates Tesla Inc. from other automobile players (Furrier, 2020, para. 7). Other notable achievements of the heavy investment in the research and development department include software iterations that enable customizable UI interface, automation of processes and product customization, and lithium batteries’ software updates.
Production
Centralized production to guarantee high-quality standards and unique products is another strategic objective of Tesla Inc.’s generic strategy. Unlike other manufacturers in the automobile industry, the company produces all its electric vehicles in Fremont, California. The firm produces its own key components of electric vehicles, including battery packs, electric motors, and chargers. Tesla Inc. also has a subassembly factory in Nevada where they manufacture their lithium-ion batteries. The electric automobile maker sources necessary manufacturing supplies across the United States, China, Europe, and other parts of the world (McKenna, 2019, para. 6). For example, China and Australia are the major suppliers of lithium.
Although lithium prices have been steadily increasing due to the high demand for electric vehicles, Tesla Inc. has a competitive advantage over its rivals because of its secured relationship with key lithium suppliers, guaranteeing the company 20% lithium supplies (McKenna, 2019, para. 6). Tesla Inc.’s production tactic reduces the leverage of the suppliers. The firm has also developed and implemented automation systems, facilitating programmed workflows, learning, and adaptation. The company also uses automated robots in the assembly line, reducing the cost of production and allowing them to supply large quantities of electric vehicles. Indeed, high-quality products and automation of processes are the essential factors that differentiate Tesla Inc. from other companies in the automobile industry.
Total Quality Management
The unique designs, exceptional performance, and sustainable energy are essential features that differentiate Tesla Inc.’s products. The company experienced significant challenges in balancing and enhancing productivity without compromising quality. Frequent worldwide recalls were reported confirming the existence of poor quality control in the production processes (Furrier, 2020, para. 11). Under-delivering was also an issue that frequently occurred, negatively impacting the company’s reliability. However, the electric automobile manufacturer invested heavily in plants and automation to ensure enhanced productivity and quality (Morris, 2020, para. 2). Tesla Inc. produces vital components of its products instead of outsourcing them from suppliers (Kim, 2020, p. 41). Additionally, they use uniform batteries size to guarantee high quality and productivity, further making the company’s competitive advantage more sustainable.
Human Resources
Human resources are key drivers of effective and efficient production strategies. Tesla Inc. acknowledges this fact and focuses on hiring the best talents worldwide to help them achieve their goals and objectives. Tesla Inc.’s mission is “to accelerate the world’s transition to sustainable energy” (About Tesla, n.d.). The mission can only be accomplished by the best and brightest individuals globally who share a similar passion for revolutionizing the world and are willing to be part of the innovative culture. The firm’s strategic objective is to ensure continuous innovative solutions and improvements by maintaining human resources capabilities to accelerate the growth of the global electric vehicles market. Consequently, Tesla Inc. has developed an organizational culture that encourages its entire staff to be innovative and creative to enhance their technological competencies.
The company adopts a rigorous hiring process than involves screening the potential employees’ educational backgrounds, technical abilities, and accomplishments, answering cultural questions, onsite interviews, and engineering and technical tests before the CEO’s approval (Furrier, 2020, para. 9). Human resource management provides training programs for the workers to orient them about the company’s organizational culture and its significance to business strategies. The accomplishment of this strategic objective ensures that Tesla Inc. has the best workforce required to realize its vision and mission, further differentiating the company from others and reinforcing its competitive advantage in the global market.
Marketing
Tesla Inc. implements the four P’s of marketing tactics to help achieve their business’s corporate objectives. The company offers environmentally friendly products, including electric vehicles, solar panels, batteries, and energy storage. The places where the customers can access the company’s products and services do not change. The places include Tesla Inc.-owned stores and service centers, the official company website, and charging stations (Ian, 2019, para. 4). The firm’s promotion relies on word of mouth and direct marketing due to its strong brand identity and social media, such as Twitter, minimizing the amount Tesla Inc. invests in advertising. For instance, sales personnel at the stores and service centers promote the products directly to the customers. According to Li, Lin, and Xu (2021, p. 32), the company uses the B2C e-commerce model. The company adopts a pricing strategy that benefits its profitability and consumers’ perception. The premium and customized pricing approaches ensure that the company attracts as many customers as possible (Furrier, 2020, para. 17). All transaction processes are done online to lower the selling cost. This marketing strategy differentiates the company from competitors and gives it a competitive advantage over the latter.
Tesla Inc.’s Competitive Advantages
Tesla Inc.’s generic strategy gives it various competitive advantages over other automobile makers worldwide. The most significant competitive advantages include the battery supply chain, AI, branding, supercharge networks, and software updates (Han, 2021 p. 574). The guaranteed supply of raw materials, economies of scale, and innovative manufacturing reduce the costs of batteries in electric vehicles. The AI applied by Tesla Inc. allows the company to lead in developing electric cars with full self-driving features. The company offers unique and customized products and services to guarantee customers satisfaction. Tesla Inc. has also established a well-integrated supercharger network, creating efficient recharging opportunities for individuals using electric vehicles (Furrier, 2020, para. 8). Frequent over-the-air software updates ensure continuous improvement of Tesla Inc.’s all-electric vehicles. The constant investment in research and development makes these competitive advantages sustainable, allowing Tesla Inc. to continue leading in the global electric vehicle market.
Conclusion
The entry of Tesla Inc. into the automobile industry to provide environmentally friendly products changed the perspective of other manufacturers regarding electric-powered vehicles. The company’s generic strategy gives sustainable competitive advantages over its competitors in the industry. The company uses broad differentiation to target premium and low-price buyers in the market. The company’s strategic objectives to realize the generic strategy includes investment in research and development, human resources, production, total quality management, and unique marketing approaches.
Reference List
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Ian, (2019). How Tesla Used a $0 Marketing Strategy to Dominate a Market. [online] Marketing Strategy.
Kim, H., (2020). Analysis of How Tesla Creates Core Innovation Capability. International Journal of Business and Management, 15(6), pp.42-61.
Li, Y., Lin, J., and Xu, S., (2021). Analysis of Tesla’s Business Model: A Comparison with Toyota. Proceedings of the 2021 International Conference on Financial Management and Economic Transition (FMET 2021), 190, pp.30-39.
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